South Korea's LG Energy Solution agreed to supply Toyota Motor with lithium-ion batteries for Toyota electric vehicles that will be assembled on U.S. soil, the companies announced late Wednesday. Toyota stock advanced Thursday.
The deal will support Toyota's expanding lineup of battery electric vehicles, or BEVs, meaning they run purely on batteries. That will include a new Kentucky-made model due in 2025.
LG will invest about $3 billion at its plant in Michigan to build a new battery production line for Toyota.
Toyota has been seen as a latecomer to battery electric vehicles, though it helped to lead the charge on hybrid vehicles with the Prius. The world's No. 1 automaker by sales now aims to sharply increase BEV sales, alongside hybrid sales, in coming years.
"Having secure supplies of lithium-ion batteries at scale with a long-term relationship to support Toyota's growth plans for BEVs in North America is critical," Toyota North America CEO Tetsuo "Ted" Ogawa said in a news release.
In the U.S., Korea's LG already partners with many auto giants on EV batteries, including General Motors.
It is the world's third largest EV battery producer after China's CATL and BYD.
Toyota Stock Gains, GM Stock Falls
U.S.-traded shares of Toyota Motor rose 2.1% to 173.04 on the stock market today. Toyota stock briefly seized the 50-day moving average intraday.
Investors have warmed to Toyota stock and Honda Motor this year partly on currency issues. The gains for Japan's Big Auto stocks also reflect what some analysts say was a delayed reaction to the companies' commitment to electric vehicles and alternate fuel technologies.
GM stock hit a three-year low Thursday. It fell 2.4% amid the UAW strike and a potential airbag recall.
Toyota Diversifies EV Battery Supply Chain
Auto giants have rushed to secure EV battery supply chains amid the transition to electric vehicles. They also expanded domestic manufacturing efforts after the Inflation Reduction Act.
According to Nikkei Asia, the global EV shift is forcing Toyota to diversify its battery supply chain.
The Japanese automaker has traditionally sourced key components from within its group, the report said. But it is now seeking to both produce batteries in-house and use battery partners given the scale of its planned EV ramp.
In its latest quarter, Toyota sold 29,000 battery electric vehicles (BEVs), roughly 1% of its overall 2.54 million vehicle sales around the world.
By 2026, Toyota plans to increase global BEV sales to 1.5 million units. By 2030, it plans to sell 3.5 million BEVs annually and to offer 30 BEV models around the world.
